Cigars, Cigarillos and Smoking Tobacco in Brazil

2021 DEVELOPMENTS

Imports bounce back: Dollar exchange rate and occasion

2020’s grim scenario for cigars involved the rapid and intense rise of the dollar exchange rate as well as the diminishing occasions for cigar smoking as a result of the pandemic due to limited socialising occasions. 2021 presented a different and unique scenario: a still high and growing dollar exchange rate but the return of consumption occasions and channels.

Consumption trends as players attempt to attract female consumers

Demand for cigars is driven strongly by the sense of depth the product has to offer in organoleptic terms, with products offering an interesting appeal to the senses. This concept has gained greater traction as Brazilian consumers become increasingly accustomed to and interested in tasting notes, which they initially encountered in wine, before exploring further in terms of coffee, beer and whiskies.

Taxation is major barrier

Although the Brazilian scenario appears to be optimistic with higher imports and new consumers discovering cigars, there remains an issue regarding availability and significant growth in the consumer base; the restrictions imposed by prices, and particularly, the price hikes as a result of high taxation.

PROSPECTS AND OPPORTUNITIES

“Sin tax” talks grow, with industry fears increasingly realised

For the second time in less than a year, the government discussed the introduction of a “sin tax” as a viable way to compensate for the loss of revenue during 2020 as well as the benefits being given to low-income families. This means that higher costs for tobacco, alcoholic drinks and added-sugar products are likely to emerge, impacting a category that already faces great challenges and constant loss of volumes and higher prices.

Growth in consumption of whiskies offers pairing opportunities with cigars

One positive aspect that can be expected is the indirect effects of the rise in popularity of whiskies among Brazilians. This was a trend identified in recent years that gained relevance in 2020, driven by affluent households enjoying additional disposable incomes due to lack of socialising and travel opportunities.

International problems, national opportunities

As COVID-19 and recent international events continue to destabilise international logistics and pressurise inflation, many companies are looking to nationalise their supply chain while consumers demand continues, despite changes in their shopping carts and a shifting of priorities. Although the scenario might present a problem as a whole for cigars in Brazil, as the product remains highly volatile due to dollar price and mostly depending on imports, it also offers unique opportunities for local production to develop and position itself as a cheaper, although high quality, alternative for consumers.